Student Loan Changes Squeeze Historically Black Colleges

Students and alumni line up at Howard University in Washington, D.C., before August's commemoration of the 50th anniversary of the March on Washington.

Nathaniel GrannThe Washington Post/Getty Images

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Originally published on September 27, 2013 5:46 pm

Stricter lending guidelines for federal school loans have made it harder to borrow money for college. Changes made in 2011 to the PLUS loan program especially have hurt historically black colleges and universities, or HBCUs, over the past few years.

An increase in Parent PLUS Loan denials contributed to a recent drop in student enrollment at many HBCUs, including Howard University in Washington, D.C. Moody's Investors Service recently downgraded the school's credit rating, citing a dip in full-time-student enrollment by about 6 percent in fall 2012 as one of a number of financial challenges facing the school.

Federal PLUS loans, which are available to both graduate students and parents of undergraduates, help fill the gap for a student's education costs after other financial aid. Applicants are only judged by their credit histories. In late 2011, the government also began checking for any unpaid debts that had been referred to collection agencies or written off.

A Change Of Plans

For some HBCU students, changes to the PLUS loan program have disrupted college plans.

A little more than a year ago, Ashleigh Uzoaru received a letter from Howard University that made her cry.

"I just was ecstatic that I was able to get into the college that I wanted to go to most," recalls Uzoaru, the first of four siblings to go to college.

A Parent PLUS Loan helped pay for Uzoaru's first year at Howard, and she expected to be approved again for her sophomore year. Instead, she received an email denying the loan request this summer.

She's now attending a local community college in New Jersey, which is the more affordable choice, she says. "But the [school's] name is what's going to carry you after you graduate," Uzoaru says. "People are going to [say], 'Oh, you went to Howard! Oh, you went to Georgetown, Yale, NYU,' whatever it [may] be, and [they] put you on a certain platform."

'The Bottom Line'

A brand-name college for students like Uzoaru can come with a hefty price tag. PLUS loans are the only federal school loans without a limit on borrowing amounts and with an interest rate currently at 6.41 percent, the highest federal school loan interest rate.

Kevin Carey, who studies education policy at the New America Foundation, says the government's tightening of lending criteria for the PLUS loan program was the right decision.

"The bottom line is there's a reason that any lender, the federal government included, takes into account creditworthiness when making loans. That goes directly to the odds of those loans being paid back," he says.

Still, students at HBCUs are often first-generation college students from low-income families who rely on Parent PLUS Loans to help pay for their education, according to Johnny Taylor, who heads the Thurgood Marshall College Fund, an advocacy group for public HBCUs.

"We talk about accessibility a lot, and in the past, that issue was one of sort of civil rights accessibility, [as in] 'I could not get into said school because I was black or yellow or whatever,' " Taylor says. "Now, the issue is, 'I can't afford to attend these schools,' and [the Parent PLUS Loan] was a tool."

"I am not satisfied with the way we handled the updating and changes to the PLUS loans program," he said at a national conference for HBCU leaders in D.C. "Some have said we are choosing not to reverse the policy because we don't care, and nothing — nothing — could be further from the truth."

On Aug. 27, Duncan toldTell Me More host Michel Martin that the government's priority is to make college more affordable for students, and it doesn't "want folks to be buried in debt that they can't pay back."

In August, the Education Department began reconsidering some denied applications from previous PLUS loan recipients and applicants with "relatively small adverse credit events," such as overdue parking tickets or medical and cellphone bills. The department plans to revisit its lending rules in the spring.

Copyright 2013 NPR. To see more, visit http://www.npr.org/.

Transcript

ROBERT SIEGEL, HOST:

Some low-income students who do apply to top colleges are running into new roadblocks. Borrowing money to pay for it all, has gotten tougher in the past few years. That's because the federal government has tightened lending guidelines.

HANSI LO WANG, BYLINE: A little more than a year ago, Ashleigh Uzoaru received a letter.

ASHLEIGH UZOARU: I cried. Me, my mom, my guidance counselor - lots of happy tears. And I just was ecstatic that I was able to get into the college that I wanted to go to most.

WANG: That college was one of the country's most prominent historically black schools - Howard University in Washington, D.C. Uzoaru is the first of four siblings to go to college. A federal Parent PLUS Loan helped pay for her first year at Howard. And she expected to be approved again for her sophomore year. Instead, Uzoaru received an email denying the loan request this summer. She's now attending a local community college in New Jersey, which she says is the more affordable choice.

UZOARU: But the name is what's going to carry you after you graduate. People are going to see, oh, you went to Howard. Oh, you went to Georgetown, Yale, NYU - whatever it be - and put you on a certain platform.

WANG: A platform that for students like Uzoaru, comes with a hefty price tag. Federal PLUS loans help fill the gap for many students' college costs after other financial aid. They're the only federal school loans without a limit on borrowing amounts, and with an interest rate of 7.9 percent. [POST-BROADCAST CORRECTION: The interest rate was lowered to 6.41 percent in July.] Applicants are only judged by their credit histories. And two years ago, the government also began checking for any unpaid debts referred to collection agencies, or that had been written off.

Kevin Carey, who studies education policy at the New America Foundation, says it was the right decision.

KEVIN CAREY: The bottom line is, there's a reason that any lender - the federal government included - takes into account credit worthiness when making loans. That goes directly to the odds of those loans being paid back.

WANG: Still, the tighter rules around the Parent PLUS Loans have had a huge impact on many historically black colleges and universities, including Baltimore's Morgan State University. Its enrollment numbers have dropped, says President David Wilson, who recently spoke with NPR.

DAVID WILSON: When you're coming from these limited-resource families and you just simply don't have to money to write a check to a college or university, how else do you expect students who just don't have the money, to experience the magic of education?

WANG: Students at historically black colleges and universities are often first-generation college students from low-income families, says Johnny Taylor, who heads an advocacy group, the Thurgood Marshall College Fund.

JOHNNY TAYLOR: See, we talk about accessibility a lot. And in the past, that issue was one of sort of civil rights accessibility - I could not get into said school because I was black or yellow, or whatever. Now, the issue is: I can't afford to attend these schools. And Parent PLUS was a tool.

WANG: One of the few tools available to many historically black colleges and universities, given their low endowments. Education Secretary Arne Duncan recently told NPR's TELL ME MORE with Michel Martin that the government's priority is to make college more affordable for students.

(SOUNDBITE OF ARCHIVED TELL ME MORE BROADCAST)

SECRETARY ARNE DUNCAN: If they don't have access to the Parent PLUS Loan, there are other grants that they automatically have access to. And in fact, those grants have gone up. So we want to make sure we're doing the right thing there. But again, we don't want folks to be buried in debt that they can't pay back.

(SOUNDBITE OF BELL CHIMES)

WANG: It's about midday in the grassy quad of Washington, D.C.'s Howard University. Things are a little different at Howard for 20-year-old Narica Clarke, now that she's a sophomore. She's noticed signs on her smartphone that some friends aren't back in school.

NARICA CLARKE: It's more of a - (Laughter) - your Instagram followers are at work.

UNIDENTIFIED WOMAN: What?

CLARKE: Mostly your friends that you expect to be going to class are posting that they're going to work.

WANG: You've noticed that?

CLARKE: I've noticed that.

WANG: Last month, the Education Department began reconsidering some denied applications for the Parent PLUS Loan. It plans to revisit its policy about the loan program in the spring.